A seismic shift in South Africa’s consumer landscape

McKinsey research underlines both the distinctiveness of black shoppers’ needs and the distance retailers must still go to serve them.

June 2010| byBronwen Chase, Thabiso Legoete, and Arend van Wamelen

In South Africa, marketers are contending with a seismic shift: the rapid rise and distinctive demands of black consumers, who are claiming the market space long denied to them. Already, there is a stark difference between the shopping experiences of black and white consumers, a recent McKinsey survey found—a difference that was even more marked among the most affluent respondents.11. The survey, which included responses from 2,850 South Africans, was conducted in 2007 and updated the following year. Our work in South African marketing indicates that the findings continue to be relevant.

For starters, simply getting to the shops is a much greater effort for black consumers: 44 percent of black respondents traveled more than 15 minutes on their most recent food-shopping trip, while just 10 percent of white South Africans did. The figure for black South Africans is also much higher than anything we saw when surveying shoppers in other emerging markets, such as Brazil (22 percent) and India (26 percent).

This finding suggests that the lingering effects of apartheid on access to shops is still apparent—yet the buying power of black consumers is fast increasing. The number of upper-income black households is growing at more than 20 percent annually; within the next few years black households will dominate the living-standards measure (LSM)22. LSM is a widely used marketing research tool in South Africa. 9–10 band, which accounts for about a third of South Africa’s grocery and apparel spending. Black households are already by far the largest group in the middle-income (LSM 5–8) market, where their numbers continue to grow steadily.

Some marketers assume that as black consumers enter higher income bands, their shopping preferences and habits will become more like those of the white consumers already in them. In fact, our research has found the opposite to be true—with profound implications for both retailers and consumer goods companies.

Consider the findings on brands: black consumers and white consumers diverge sharply from each other. For example, 49 percent of middle-income black consumers agree with the statement “I purchase branded food products because they make me feel good.” Only 26 percent of middle-income whites say the same. Among upper-income blacks, the number jumps to 65 percent, while for whites in the same category it falls to 22 percent.

This pattern persisted in apparel. Take jeans: 57 percent of both middle- and upper-income blacks believe that brands are important when buying them, against just 18 percent and 27 percent for middle- and upper-income whites, respectively. The divergence is even starker in electronic goods: 71 percent of upper-income blacks—but only 18 percent of comparable whites—agree with the statement “I purchase branded products because they make me feel good.” Among middle-income groups, 50 percent of blacks but only 10 percent of whites agree.

The importance of brands to black consumers may be related to their low level of trust in retailers and consumer goods. An astonishing 71 percent of black consumers agree with the statement “I have to pay careful attention so stores do not cheat me.” In electronic goods, more than 60 percent of black consumers agree that “products with no brands or less-known brands might be unsafe to use.” In both cases, far fewer whites concurred.

These findings lay down a challenge to retailers and suppliers to make black consumers feel more welcome in their stores and more trusting of their products. And the findings present an opportunity to those savvy enough to capitalize on a much more brand-conscious customer base—for example, by developing stronger grocery brands.

There is also an opportunity to shake up marketing in exciting new ways: according to our survey results, black consumers are more passionate shoppers than their white counterparts are; a majority of black consumers agree that “shopping is one of my favorite leisure activities.” Whether shopping for clothes or TVs, they are also much more interested in fashion—for example, 45 percent of upper-income blacks “often upgrade my electronics to keep up with the fashion”; just 11 percent of comparable whites do the same.

Be warned, however: even if black consumers overall have very different preferences compared with their white neighbors, there is no typical black consumer. Indeed, the research uncovered some dramatically different attitudinal segments among South African shoppers—both black and white. This finding is consistent with McKinsey’s experience in other places, where marketers are having to contend with an explosion in customer segments.

Among South African grocery shoppers, for example, we found no fewer than six distinctive segments. These range from “Thrifty,” the core discount shopper unwilling to pay more for convenience, brand, or quality (22 percent of middle-income and 23 percent of higher-income shoppers), to “Flaunty,” the with-it, brand-conscious shopping enthusiast who is willing to pay more for quality (22 percent and 15 percent, respectively)—a surprising segment to encounter in the food aisle. As the percentages of Thrifties and Flaunties suggest, the attitudes and outlooks of consumers are more important than their incomes in determining shopping behavior.

The differences between such segments mean that marketers must look behind the aggregate numbers before making assumptions about their customers. For example, 57 percent of black consumers (including 54 percent of those categorized as high income) agree that “my main concern when I shop for food is to save as much money as possible”—a higher percentage than we found in almost every other country we surveyed. At first glance, this would suggest that price conquers all, but a closer look at the segments supports a more nuanced approach.

People in the “Hasty” segment, for example, will pay more for fast, easy, quality shopping. They make up 10 percent of middle-income South Africans and a sizable 31 percent of their high-income counterparts. Retailers that offer compelling convenience formats to Hasties stand to gain—especially considering how far many South Africans must travel for their food shopping.

The buying power and shopping passion of black consumers are already reshaping South Africa’s marketing landscape. This research—which underlines both how distinctive black shoppers’ needs are and the distance that retailers must still go to serve them—suggests that the revolution has only just begun.

About the authors

Arend van Wamelen is a principal in McKinsey’s Johannesburg office, of which Bronwen Chase and Thabiso Legoete are alumni.

A version of this article, titled “A seismic shift in SA’s consumer landscape,” appeared in South Africa’s Business Day Management Review, in September 2008.

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